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Organization for
Program Management
Organization for
Program Management
C . Davies
National Coal Board, London
A. Demb
Management Consultant
R. Espejo
The Management Centre, Aston University
A Wiley-1nterscience Publication
JOHN WILEY & SONS
Chichester - New York
- Brisbane
- Toronto
Copyright @ 1979 by John Wiey & Sons Ltd.
All rights resewed.
No part of this book may be reproduced by any means, nor
transmitted, nor translated into a machine language without
the written permission of the publisher.
Library of Congress C-loging
in Publication Data:
FTU
Davies, Cyril.
Organization for program management.
'A Wiley-Interscience public tion '
~ I n c l u d e s ~ b , i - , \ i ~ ~ ~ ~a -~. Atc !y .e ~
J 1. Economic development projects-Managpment.
Industrial project management.4. Demb, Ada, joint
author!^^. E s ~ e i o Raul.
.
ioint author!^^^. Title.
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Typeset by Preface Ltd, Salisbury, Wilts
Printed in Great Britain by Unwin Brothers Ltd.,
The Gresham Press, Old Woking, Surrey
\A\
Acknowledgments
The book could not have been conceived without the support and opportunities created by the International Institute for Applied Systems Analysis
(IIASA) and its growing role in the international scientific world. Although
the conceptual framework is the result of the authors' research, its development and examination were possible only in the context of IIASA's
research on case studies of large-scale programs. Particularly, we thank Professor Hans Knop who established our team and supported the research.
The framework became more meaningful through application and testing
on on-going activities such as the Bratsk-Ilimsk territorial production complex (BITPC) and Scottish development related to North Sea oil exploitation.
The BITPC Case research was undertaken in the context of a wider IIASA
case study. The State Committee for Science and Technology and the USSR
Academy of Sciences played key roles in the preparation of background
material and in arranging for the field study. Being involved in this project we
were able to interview and discuss with Soviet scientists and administrative
leaders many aspects of the case study. We are particularly grateful for the
contribution of Professor V. Smirnov, Dr. V. P. Gukov, and Dr. G. I. Fishin
with whom we had long and vely productive discussions both in the Soviet
Union and at IIASA.
The Scottish case was organized on our initiative and we thank the British
Royal Society for its support and Mr. G. Edwards of the Scottish Council
(Development and Industry) for his personal efforts on our behalf. We
appreciate the time and attention given by the many scientists and administrators in Scotland and England, without whose willing cooperation the study
would not have been possible.
The bulk of this work was done at IIASA. Interaction with our colleagues
and with the wider scientific community of the Institute aided us in the selection of relevant points and illustrations, and certainly improved the quality of
our work. In this regard we would like to mention the role of Professor I.
Hamilton, who found it possible to review our early drafts of the two case
studies.
We wish to acknowledge the role of the Survey Project at IIASA, the
Executive Director, Dr. E. Quade, and Editor Ms. Jeannette Lindsay. Under
the leadership of Dr. Quade support was provided for the meetings in the
spring of 1977 which resulted in this book. These meetings provided us with
the opportunity to consolidate and to synthesize our previous work. It would
not have been possible otherwise.
In elaborating the framework we greatly benefited from constant discussions with Dr. Roman Ostrowski of the Polish Academy of Sciences, who
was attached to IIASA at the time of this research and who was involved with
the authors in carrying out the field studies. While the authors must naturally
take responsibility for the material included here, the contribution of Dr.
Ostrowski to this work cannot be exaggerated. In particular we should mention the special role he played in the Soviet case study where his fluency in
Russian and familiarity (relative to the authors) with the Soviet system of
planning was invaluable. Chapters 8 and 9 on the Soviet case are largely
identical to the chapter on P l a ~ i n gand Organisation in the IIASA Report
on the Soviet case (Knop et al., 1978). That chapter was written by the
authors together with Dr. Ostrowski.
Contents
Preface
.
.
.
Chapter I Introduction
Chapter 2 Systems Concepts for Organizational Analysis
Chapter 3 From Institutions to the Model System
Chapter 4 The Model System in Action
Chapter 5 An Approach to Effectiveness
.
.
.
.
Chapter 6 Scottish Development and North Sea O
i
l
:
Background Description
Chapter 7 Seottiih Development and North Sea Oil:
Framework Application
Chapter 8 The Bratsk-Ilimsk Territorial Production Complex
(BITPC): Background Description
.
.
., .
Chapter 9 Bratsk-llimsk Territorial Production Complex:
Framework Application
Chapter 10 Insights from Abstraction
Chapter 11 From Abstraction to Policy
References .
Bibliography
Index
. . .
. .
.
.
. .
. .
vii
Preface
Our purpose in this volume is to present and demonstrate a conceptual
framework for the analysis of the organizational dimension of development
programs. The conceptual framework is intended to provide a method for
deriving the organizational implications of program objectives and assessing
the capacity of existing or planned institutional resources in terms of those
implications. It can be utilized either to generate alternative organizational
strategies or to evaluate policy proposals in terms of their contribution to
effective program management.
Research on the organizational dimension of program management was
begun in the context of examining the management of regional development.
It became apparent that regional development was only one example of a
development strategy where organizational problems were a consequence of
the overall complexity of the 'program' strategy rather than of the particular
objectives. Development programs addressing a wide variety of societal
goals-education, medical care, agriculture-share
these organizational
dilemmas. Furthermore, no single nation appears to have a monopoly on
either dilemmas or solutions. From our experience the USSR, Poland, the
United Kingdom, the United States, and Venezuela all appear to share the
need for analytic support which can provide organizational strategies
adequate to the complexity of development programs. We sought, thus, to
develop an analytic approach that could be applied in settings as diverse as
these.
The task represents an exciting challenge, and this volume reports on progress towards that goal. The research is the work of an international and
interdisciplinary team that was active full-time from January 1976 to January
1977 at the International Institute for Applied Systems Analysis. The book
itself was written during the late spring of 1977 using case material prepared
during 1976. Together we combine experiences from three diverse national
settings and three different and complementary research perspectives on
organization and management. While many observers regard the field of
organization studies as unified, researchers will be acutely aware of the
specialization within this broad area. As a team we integrated perspectives
from operations research, organization behaviour, cybernetics, and control
systems into a framework for studying the organizational dimension of the
management of development programs.
We are aware of the voluminous research addressing issues related to program management. Much of this research, focusing particularly on 'project
management', addresses issues of planning and control techniques for the
management of finite projects. Our concern here, by contrast, is the analysis
and design of organizational strategies for continuing program management.
The conceptual framework is intended to provide a meta-logic with which to
structure and relate the many techniques and theories of project management
to one another and to the dimensions of program management which they
best address.
Where appropriate, reference is made to such techniques and theories.
These references, however, serve only to illustrate. We make neither an
attempt nor a claim to survey the 'organization literature' in this field or to
identlfy all research relevant to our framework. We will assume that our
audience is aware of approaches to project management from their own
experiences and is cognizant of their value and limitations. Details of related
approaches are therefore not presented. Our purpose is to demonstrate a
conceptual framework to support the analysis of the organizational dimensions of program management. For the decision maker, researcher, and
policy analyst concerned with program system design, we hope to outline an
approach which contributes to work in this area.
The work is aimed at these several audiences, and various chapters are
written accordingly. Overall, our intent is to provide policy makers and managers in development agencies and development programs with a sense of the
analytic support available for this dimension of program design. The introduction, conceptual language, case material, and summary chapters are
written in a style and language that require little 'scholarly' background in
organization theory. These sections are intended for practitioners at upper
management levels. By contrast, the elaboration of the framework and
discussion of effectiveness are provided for the researcher and analyst with
a more specialized background in the field. Hopefully, readers from both
audiences will he interested in both sets of materials.
The problem and basic concepts used in the framework are introduced in
Chapters 1and 2. Elements of the analytic process and the role of this type of
research are examined and described in these sections. Chapters 3, 4, and 5
elaborate the conceptual framework and present the criteria for effectiveness
which underlie this approach.
Application of the analytic approach is illustrated in two case studies of
regional development and is presented in Chapters 6, 7, 8, and 9. Together
the two cases demonstrate the flexibility of the approach as well as its analytic
strength. There are important differences in the values governing institutional
management and behaviour in the two settings. While each represents an
instance of development in an industrialized nation, in Scotland program
activities constitute a disturbance in on-going institutional activities and rela-
tionships while in the Soviet Union the program initiated activity where none
had existed before. Yet the fundamental challenge was the same in each
setting: to provide for the effective organization of institutional resources for
the management of program activities.
In the Scottish case study we examine the organization dimensions of the
response to the development of oil resources in the North Sea. Research for
this case was initiated and undertaken by the authors. The Soviet case focuses
on the management of a multi-sectoral industrial complex in Siberia that is
designed to be largely self-contained in terms of labour, food supply, educational and medical facilities, and secondary industries. In this case, research
was undertaken by the authors in the context of a larger field study which
involved some twenty scientists from eleven countries (Knop et al., 1978).
The status of conclusions and the nature of the data base in the two cases
differ accordingly.
In addition to these case studies, we draw upon less comprehensive studies
of three other programs of regional development. While findings are not
included from these cases, the integrated framework evolved as a result of
examining programs in these five national settings. Scotland (UK) and Bratsk
(USSR) are reported fully in this volume. In addition, one of the authors was
involved in a larger field study of the Tennessee Valley Authority in the
United States; all three visited Poland where planning is now underway for
the development of a major settlement and industrial complex in the coal
basin of Luhlin; and the published material on the Guayana development in
Venezuela was examined as a fifth case.
The outputs of this type of analysis, the nature of the results, and the status
of strategy alternatives are outlined in Chapters 10 and 11. The final chapter
(chapte;i 1) summarizes the nature of theinsights to be gained and explores
the more general implications for the management of programs in many fields
of endeavour.
Cyril Davies
Ada Demb
Raul Espejo
CHAPTER 1
Introduction
If there is a single dimension that characterizes the significant problems of
the twentieth century it is their complexity. It is an inescapable complexity
imposed by technology, resources, economics, and politics. Throughout the
world, complex problems confront policy makers and demand solution:
industrialization, food production, energy distribution, the provision of clean
water. In one way or another, all are problems of development, be it from a
state of underdevelopment to industrialization or from industrialization to
postindustrial stabilization.
While different issues come to the fore in different parts of the world,
policies directed at their solution often take the form of development 'programs'. As a strategy, a program generally permits a more comprehensive
concentration of resources and attention than that which can be achieved
through usual management processes.
The term 'program management' has been chosen to distinguish between
program and project and between management and implementation. 'Project
management' or 'project impementation' is used to denote undertakings of a
nature similar to those which are the subject here. They are similar, but
different, in important aspects. Usually, 'projects' refers to an undertaking of
finite duration whose goal is the production of a specific and tangible product.
As it is used in this volume, 'program' refers to undertakings whose product
might best be described as a process. The goal of a development program,
such as regional development, is the creation of both the physical resources
and the management capability for the continuing development of a region.
One can define as a goal the achievement of a steady state for the program, by
contrast with an earlier period of growth and development, but the definition
of a point where the development is 'finished' is an inappropriate formulation
of the objective. Programs of this type often involve dozens of subsidiary
activities which might appropriately be called projects.
The distinction between management and implementation pertains to the
phases of program evolution with which the analysis will be concerned. All
programs evolve through several stages and while the literature provides a
variety of names for them, we can identify at least four: a conceptual phase
when objectives are defined, a planning phase when strategies for resources
allocation are devised, an implementation phase when plans are put into
action, and an evaluation phase where there is some determination of the
1
)
0bObjel;tive definition
1
Management
Evaluation
J
Figure 1.I. Management versus
implementation
degree to which objectives have been achieved (Martini, 1976). There is
usually interaction and feedback between phases. Conceived thus, implementation represents a discrete phase when objectives are taken as given and the
immediate concern is with the realization of plans.
Program management will be used to refer to the entire process of objective
definition, planning, implementation, and evaluation (see Figure 1.1). As
programs progress through these various stages of development, it is expected
that different organizational strategies will be appropriate. This discussion
will include, for example, consideration of program objectives and their
appropriateness in the context of the institutional resources available for
program management. There is no point in defining a set of program objectives which are beyond available resources, whether those resources be physical or managerial. Limitations imposed by physical resources may tend to be
more visible; however, the limitations resulting form managerial resources
are equally important. One purpose of the conceptual framework is to make
the nature of institutional resources and their limitations more visible.
Of the many important aspects of program management, this discussion
will examine the crucial issues of organization. Organization refers to the
structure and use of the institutional resources available for program management. Throughout the book, the terms, organization and institution will be
used in the following sense. Institution refers to observable structures in the
program setting; organization refers to the relationships between these structures or their sub-units, usually in terms of the relationships among elements
of an abstract system, such as the program management system. While there
are many techniques and skills to support the technical and economic aspects
of development programs, there appear to be few that apply to organization.
This has created a gap between the technical and economic definition of
program objectives and the capacity to achieve them in particular settings. It is
this gap that is largely responsible for the many instances where the success of
programs seems to have been less than that merited by the quality of the
technical preparation. To remedy this situation there is a need to design
management systems whose capacity matches the challenges presented by the
development programs.
It is towards this end that this discussion is directed: effective organization
for program management. Who should manage the program? Should a new
institution be created? How can existing institutions be involved most effectively? Where should decision authority for particular activities rest? On what
criteria should these and similar decisions be taken? What are the trade-offs
involved?
One might well point out that the set of questions posed in the context of
program management differ little from the set which might be posed in the
context of manufacturing shoes or managing a research institute. The argument would be well taken. However, it is not the set of questions which
distinguishes this approach from others but rather the complexity of the
organizational issues to which it is addressed. Adequate institutional alternatives have long since been evolved for shoe mahufacture; however, for the
management of programs there appears to be no such satisfactory answers.
1.1 Which programs?
The programs for which this approach is most useful and most interesting are
development programs which are non-conventional and multi-institutiona1.A
non-conventional program is characterized by the nature of the managerial
challenge presented by the problem it was conceived to solve. The conceptual
framework presented in this volume is particularly useful for analysing programs designed to accomplish goals which are new or have been formulated in
a way that requires combinations of activities which are unusual for the program setting. This 'newness' aspect of the program will pose challenges for
management which are beyond the capacity of existing managerial processes
and structures, and will require organizational support fundamentally different from that which already exists.
Programs which pose management challenges are those for which there
exist no ready-made set of organizational strategies in the program setting.
The challenges presented by any particular set of program objectives, such as
regional development, will vary according to the setting in which the program
is to be implemented. Thus, programs which represent everyday strategies in
one setting, such as the creation of industrial parks, might well be categorized
as non-conventional in another. The sophistication of the program setting with
respect to program objectives will largely determine the extent of managerial
challenges and, thus the potential of the framework to provide new insights.
It requires no special expertise to identlfy subject programs. Identification
of programs whose non-conventional nature stretch and challenge the managerial capability of a setting will be intuitively obvious to those familiar with
the setting. It is important to note, however, that while the conceptual
framework would certainly be helpful in the design of a shoe factory, because
it was developed specifically to capture the complexity of non-conventional,
multi-institutional programs, application in more conventional situations
might appear inefficient in terms of the time and energy expended for
analysis.
The variety and scale of such programs is limitless. They may involve the
provision of medical services to an urban area, the coordination of disaster
relief on a world-wide basis, regional development, or the consolidation of
efforts to put a man on the moon. Whether the objective is of local or global
significance, the intention to integrate a set of activities so that the result is a
synergistic combination of the energy and resources invested raises a similar
set of complex organizational issues, regardless of program objectives. The
same set of organizational questions must be answered whether the program
is to integrate handicapped children into the mainstream of an educational
system or to develop a harbour area. To be sure, appropriate organizational
strategies will differ dramatically from program to program, as well as from
setting to setting for similar types of programs. However, in all cases a similar
analytic process and criteria of effectiveness of organization can be brought to
bear to assess existing institutional capacity and to devise or evalute alternative solutions.
In general, programs will have been conceived to integrate activities which
are normally managed by multi institutions, which may or may not have
interacted prior to the initiation of the program. Organizational issues are
particularly critical to the success of such ventures, where the achievement of
program objectives depends upon the consolidation of highly interdependent
set of activities. There are no obvious answers to questions of the location of
discretion over activities, control, or coordination capabilities. In the case of
the shoe factory, there is a wealth of conventional wisdom from which
strategies can be devised. Most of the conventional wisdom relevant to particular industries cannot be directly transferred to program application, however. Rules of thumb used in managing industrial organizations tend to be
overwhelmed by the complexity of relationships to be managed in the program context. Here is the place for a systems approach specifically evolved to
address the organization of non-conventional, multi-institutional activity.
1.2 Characteristics of the approach
The organizational challenge presented by these programs may be formulated
as that of creating a 'system' where the priority of the overall objective, the
program objective, is shared by and consistent with the objectives of
oarticioating institutions. Whether or not the institutions are aware of their
(intended) role in the program, the actual capacity for program management
rests with these institutions. Thev reuresent the institutional resources for
managing the program. The quality of program management depends, thus,
upon the organization of these resources into a functioning system.
A systems approach, such as the one presented here, permits explicit
treatment of the interdependence among institutions and activities so
essential to the achievement of program objectives. It is intended to aid
decision makers in choosing among organizational strategies by identifying
alternatives and comparing them in the light of their consequences with
. -
A
-
Policy rnoker
analysts
Program
object lves
strategies
Conceptual
framework
I
'I
Organ~zational
strategies
I
Figure 1.2. Organizational strategy formulation
respect to the achievement of program objectives. It provides a
comprehensive and holistic framework for assessing existing institutional
resources and alternatives in terms which are both accurate and operational.
Figure 1.2 illustrates the process for which the analysis is intended to
provide support. Program objectives are an expression of policy and the result
of political, as much as analytic, processes. There are a set of activities or tasks
which are implicit in the program objectives and which can be identified as
essential to achievement of those objectives. There are also a set of
institutions which are usually involved in the management of many of those
activities and, perhaps, a plan for other institutions to be created specifically
for the purpose of managing program activities. The problem is to determine
an organizational strategy which best utilizes those resources in the
achievement of program objectives.
While there is no single best form of organization for program management,
there are modes of organization which are more effective in facilitating
program objectives than others. Generally speaking, selection of an
appropriate instimtional strategy should be a function of the nature of program
objectives and activities, existing institutional relationships, and the values
governing management and organization in the program setting. At the same
time, there does exist a set of principles which can be used to sort or to create
strategies which are more effective and appropriate.
The conceptual framework provides policy makers, through their analysts,
with the capability for assessing existing institutional resources and strategy
alternatives according to a set of criteria which derive from organizational
principles. The framework is best used by analysts familiar with, or resident
in, the program setting. The outputs of the conceptual framework will need to
be transformed by the analyst into a form which is useful for the policy maker.
At the same time, as indicated in Figure 1.2, interaction with policy makers
throughout the analytic process is critical, for only the policy maker can
identify those issues and aspects of organization which are important for
policy purposes.
Implicit in this process is the assumption that there are two sets of criteria
which must be applied in order to select an appropriate institutional strategy.
The two sets refer to effectiveness and feasibility. The first, effectiveness, is
defined strictly in terms of organizational principles. The conceptual
framework relates this set of criteria to the process. The effectiveness criteria
aid in identifying the nature of organizational trade-offs resulting from
particular institutional alternatives. The purpose of the analysis is to clanfy
the consequences of the alternatives in order to provide the policy maker with
real choice. The identification of better alternatives and opportunities for
improvement is the goal rather than the creation of some 'optimal'
organization-whatever that might be.
For any given program, more than one (effective) organizational strategy
exists. However, selection of a strategy depends upon the values and
traditions of the program setting. Criteria will vary and will narrow the range
of appropriate organizational strategies. This variance, the result of
differences in economic, political, and philosophical approaches to society,
precludes the search for a single, optimal, and transferable organizational
solution for the management of particular types of program, such as regional
development.
In addition, for any given organizational strategy, there are a number of
institutional alternatives which will satisfy the effectiveness criteria inherent
in that organizational strategy. Thus, in any setting, there are a number of
institutional alternatives which will be appropriate. The conceptual
framework can identify the nature of the trade-offs among them. Choice
among these institutional alternatives is a matter of feusibiliv. Feasibility
depends not only upon the values and traditions of the program setting but
also upon current politics and the preferences of policy makers. Only they can
make this last judgement.
Thus, it is considered axiomatic that solutions, appropriate institutional
alternatives, must be tailor-made to the values of the setting, for institutional
structure and behaviour mirror social philosophy. Thus, not only is it
expected that organizational strategies appropriate for a planned economy
with state ownership would be inappropriate for an economy based on private
ownership, but also that the more subtle differences in social norms governing
managerial behaviour in either setting precludes the direct transfer of either
organizational or institutional alternatives, even for programs dealing with
the same objectives.
Description of progmm
objectives, activities
and institutional resources
I
progmm management system
Organ imtional diagnosis
md/or
generation of insfifutional
alternatives
Figure 1.3. Analytic process
At the same time, however, there appears to be a set of organizational
principles which can form the basis for designing and evaluating
organizational strategies regardless of the institutional forms which they may
take or the setting. These principles are independent of the values and social
philosophies which distinguish societies.
Analysis applied to the question of effectiveness of organization is
accomplished in a multi-step process which involves the use of an abstraction
of the program objectives and of institutional resources (see Figure 1.3). The
descriptions of institutional resources and activities are formalized and
transformed into a systemic representation in order to address this issue.
The transformation permits a reformulation of issues and construction of a
model of the program management system which can be analysed and
diagnosed. The systemic nature of the model orders the multiplicity of
program activities and institutional relationships with a logic that permits
operational consideration of such issues as interdependence, the distribution
of discretion and authority planning capability, communication links, and
many others. The use of the abstract language and model frees the approach
of the bias and limitations that are inherent in institutional language, thus
making it generalizable across programs and national settings.
The step from analysis to the creation of organizational proposals requires
a translation from the abstraction into institutional alternatives, i.e. forms
which are appropriate for the program setting. It is these solutions which vary
from setting to setting. It is essential that the generation of specific strategy
alternatives be undertaken in close collaboration with, or by, persons
intimately familiar with the managerial and institutional traditions and norms
of the program setting. In theory, the analysis can generate a wide range of
effective alternatives and can identify problem areas in existing proposals. In a
process of translation and reanalysis, feasible alternatives or proposals are
created from the outputs of the analysis for consideration by policy makers.
Analysis should provide an operational understanding of existing
organizational strategies and institutional resources which can lead to
reformulation of either the organizational strategies or program objectives.
However, the analysis must be coupled with a sound and intimate
understanding of the values and traditions of the program setting in order to
produce the feasible outputs which are of use to policy makers.
In the context of international organizational research, it is our view that
organizational solutions to program management cannot be prepackaged and
transferred from setting to setting. Differences among nations and cultures,
the differences that make the world as rich in variety as it is, precludes this
sort of packaging. In this context, organizational research is better able to
offer an approach which can be packaged and utilized by analysts, managers,
and policy makers to find their own best solutions. Such is our intent here.
The aim is to transfer a capability for analysis, in the form of the conceptual
framework and process, which can be used by others to find appropriate and
effective solutions to their organizational problems.
1.3 Case illustrations
Illustrations of the application of this approach and framework are drawn
from two case studies of regional development. A brief introduction to
program objectives and case settings are provided at this point so that the
nature of the research and examples presented in succeeding chapters will be
more comprehensible.
The research on Scotland focused on the response to oil exploration and
development in the North Sea. For purposes of the study, Scotland was
defined as the development region and two program objectives (challenges)
were identified. In the short term, the objective was to protect and preserve
the aualitv of life in local communities while, at the same time, facilitating
-a
national United Kingdqm policy of rapid oil exploitation. The long-term
obiective was to capitahe upon the oil development for the long-term
development of the- ScottishAeconorny.A
challenge lay
the
achievement of consistency between strategies for realizing both short- and
long-term objectives. In this case, the objectives as stated here represented
shared, but unofficial, attitudes of persons in governmental and private
sectors, rather than the specific goals of a unified program for whose
implementation resources had been consciously committed.
Oil activities can be categorized in three phases, all of which impinge
differently upon and demand responses from the region: exploration,
development or construction, and production. Construction of oil rigs for
exploration and production platforms for later exploitation are one major
activity which illustrates the scope of the regional impact. Sites must be
approved for construction yards; trained steel workers are needed for
construction; and the steel plate which is the building material must be
contracted for. These are some primary aspects of the activity. Local
accommodation for the working population is required, including services as
varied as schools and restaurant, and a transport network to bring in material
must be created to handle large and heavy trucking. For this activity alone
management decisions must be taken with respect to land use, housing,
economic policy, education, and environment. Other oil activities engender
similar impacts. Where and how should the oii be brought to land? What
degree of harbour development is appropriate to support these many
activities? If, when, and where are refining facilities to be built? Who will
finance support activities?
There are a myriad of decisions to be taken, many of them the
responsibility of widely scattered, semi-independent, and independent
agencies. All of them affect local (community), regional (Scottish), and
national United Kingdom interests. As it is primarily government in Scotland
and the United Kingdom which has formulated these objectives and sought
various mechanisms to coordinate the collective response in some manner,
government was the subject of the organizational analysis. Both private and
national industries play integral roles in the achievement of program objectives, however. The study examined governmental response in the context of
the two objectives at three levels: United Kingdom, Scotland, and local
authorities.
Chapters 6 and 7 provide a much fuller description of the region, oil activity, and the nature of the impacts, as well as an examination of the organizational response. The Scottish case was originally undertaken as a first field
test of the capability of the concepts which are the foundation of the framework. The discussion therefore emphasizes the first three steps of the research
process (Figure 1.3), aiming to illustrate the construction of the model from
the data. Analysis and diagnosis are undertaken only to identify broad policy
issues, rather than to generate specific institutional proposals.
The Soviet case examines the organizational dimension of the management
of a regional development strategy called the 'territorial production complex
(TPC)'. The development is being undertaken in Siberia, in the region surrounding Bratsk, north of Irkutsk (see Figure 9.1). The creation of TPCs is a
long-term official Soviet strategy for regional development. For each TPC
very specific objectives are defined in terms of the industries, population, and
service facilities to be created. The overall objective is the creation of multisectoral industrial complexes which are largely setf-contained in terms of
labor, food supplies, educational and medical facilities, and secondary industries. Supported by researchers involved in the design of management processes for future TPCs, we examined the comprehensiveness and consistencyof
current management processes in order to provide them withinsightsinto Soviet
management proposals now under discussion. TPC development represents
official unified programs to which vast resources have already been committed;
intent to implement is a matter of history.
The Bratsk-Ilimsk TPC centres on three settlements; the Bratsk 'node' is
now approaching a steady state. At least six national and four republican
industrial ministries are involved in managing TPC activities, in conjunction
with governmental authorities from several levels--city, region, and republic.
Three management challenges were identified as representing key organizational issues. The first chalienge is the choice of the industries of national
importance which form the basis of TPC development. The Soviet system of
planning carried out by ministries and all territorial governments must
accommodate to the complicated justification required of industrial investments which make up an interdependent, multi-sectoral industrial complex.
The second challenge involves the synchronization of the construction of
industries subordinated to national and republican authorities with infrastructure. In the Siberian wilderness, realization of the potential of these huge
investments is critically dependent upon the timely completion of interdependent projects which are under the control of separate sectoral ministries. The third challenge is the design and completion of attractive and selfcontained human settlements in the wilderness. Again, decisions for the different aspects of this challenge rests with a variety of local, republican, and
national agencies.
Chapters 8 and 9 describe the program strategy, TPC, the challenges, and
institutional actors in detail. The purpose of the study was to provide Soviet
scientists with an outside view of the organizational issues involved in the
strategy. None of the authors is a specialist in Soviet management practices;
nonetheless, the analysis identifies issues which can be examined in more
depth by specialists. Conclusions discuss three current Soviet proposals for
improving the effectiveness of TPC management. This case focuses on policy
issues, by contrast with the Scottish case, which places emphasis on an illustration of the use of the concepts.
Both cases suffer limitations with respect to the use of the conclusions by
policy makers. Logistics, time, and expense precluded an achievement of the
level of detail more desirable for specific, policy-relevant analysis. Further, in
neither case was it possible to interact with either policy analysts or scientists
in the construction of feasible alternatives after the organizational analysis.
Such is often the fate of methodological research. This last step would be the
very raison d'2tre for research aimed at the generation of specific organizational strategies. The limitations of the cases with respect to specific policy
support are recognized. Far more important is their usefulness in testing and
demonstrating a conceptual framework in field applications. The two programs are differently complex; each employs different institutional forms in
implementing program activity and each would require a tailor-made
strategy. The framework appears to provide an adequate and insightful basis
with which to approach the organizational issues for both. The purpose of this
volume is to discuss that approach so that others may take it forward in
support of policy.
1.4 Presentation strategy
To facilitate communication, the conceptual framework and the process of
application have been presented in a somewhat linear mode. The process is,
in fact, tightly iterative and, while the linearity of the presentation is helpful, it
is a distortion which may tend to obfuscate the synthetic aspects of the
process. It is hoped that the presentation, which will take the reader through
two full iterations of the framework and process, will make it possible for the
reader to experiment with these concepts in his or her own context (see
Figure 1.4). Whiie hardly a formula for organizational analysis, the
presentation seeks to make the concepts and process as understandable as
possible.
The first iteration consists of Chapters 2, 3, 4, and 5. In Chapter 2 the
systemic concepts which form the basis of the conceptual framework and the
model are introduced. The process of constructing a model of the program
management system is explained in Chapter 3. The linearity of presentation
has been exploited particularly in this chapter; however, in practice this
transformation process is almost constantly iterative, resulting in a rich,
synthetic understanding of the organizational dimensions of the program.
Chapter 4 develops the concept of effectiveness which provides the criteria
for -analysing the appropriateness of the organization for program
management. All of these concepts are reviewed in Chapter 5 in the more
formal language of cybernetics. This is the most abstract of the chapters.
The second iteration occurs in the case studies and in Chapter 10. The
Scottish case, Chapters 6 and 7, was undertaken as a first field test of the
methodology in its early phase of development. The Soviet case, Chapters 8
and 9, examined organizational issues of the TPC strategy in a research mode.
We must stress that these two cases do not, in our opinion, exploit the full
strength of the framework to support organizational policy for program
management. Both, however, are richly illustrative of the concepts and the
process. In addition, the cases serve another role. As reports on the
experiences of these two countries they provide a different perspective from
which to view both oil development in Scotland and integrated regional
development in the Soviet Union. Chapter 10 reviews the two cases, adding
First iteration
(conceptual presentation)
Analytic proces
Second iteration
(case illustrations)
0
Chapter 6
Data base
Chapter 3
From Institutions to the
Model System
Chapter 2
Systems Concepts for
Organizational Analysis
Chapter 4
Chapter 5
Chapter 8
Scottish Background
Description
Bratsk-llimsk Background
Description
Transformation
Chapter 7
Chapter 9
Scottish Framework
Application
Bratsk-llimsk Framework
Application
0
The Model System i n Action
A n Approach to Effectiveness
Analysis
I
Diagnosis
Alternatives
and
I
Chapter 10
Chapter 11
Figure 1.4. Structure of the book related to the analytic process
Insights from Abstraction
From Abstract~ont o Policy
the insights which have resulted from later developments of the concepts and
a reexamination of the case material.
Chapter 11 presents the nature of the results one can expect to achieve
utilzing this approach. The need for interface with policy makers and the
implications of analytic results are explored, along with a discussion of the
potential of this framework in a broader research context.
CHAPTER 2
Systems Concepts for Organizational
Analysis
2.1 The systems
It is very much the fashion nowadays for people, in their roles as managers,
politicians, or analysts, to talk in terms of systems and to use some of the
terminology of systems theory. Sometimes the claim that they are adopting
a systems view is legitimate. Unfortunately, at other times the use made of
the language is rather empty, and when this happens the language can
become somewhat degraded and confused. Following the fashion, it must
be said that the approach which will be applied to program management is
a systems approach. However, rather than making unjustified claims the
danger here is, perhaps, the opposite-that the strictly systems perspective
adopted may make some of the issues of management seem unfamiliar. In
the opening chapter, for example, it was claimed that successful program
management depends on creating a system out of the institutional
resources concerned with the program whose goal is the achievement of
program objectives. This is not a familar formulation of the problem of
managing complex programs involving many different institutions, but it is
fundamental to the approach of this book. In this chapter the terms and
concepts necessary to support this view will be introduced and the
consequences of this approach explored. The understanding that this
creates will act as a foundation to be built upon in later chapters, which
develop more rigorously the ideas used and their potential.
The first need is to define what is meant by 'system'. Very generally a
system can be said to be composed of distinguishable parts or elements whose
relationship to one another is defined and whose behaviour is mutually supportive towards the achievement of a common objective. This mutual supportive behaviour endows the system with potentials which go beyond the potentials of the elements viewed individually. The behaviour or actions of any
element can only be understood fully in the context of the whole system. At
this level of generality, characterization of a system is much wider than program management, but the specific features of program management can easily
be fitted to this characterization. The elements of the system are what have
been called earlier the 'institutional resources'. Some of these may have
existed prior to the program while other elements may be created in the
course of program planning and implementation. The relationships between
the elements are described in terms of links, executive and informational,
between those institutions. The objectives governing overall system
behaviour are the program objectives.
It is the program objectives that define the basis for membership of the
system, i.e. which institutions are considered part of the system. It is all very
well to talk loosely about participating institutions but there is a need to
define what this means. Because of the complexities which are apparent in
industrialized nations any major programs could in one way or another
involve very many institutions, and to make analysis tenable some way must
be found to identify the ones with which analysis will be centrally wncerned.
Consideration of objectives allows this identification. It is only those bodies
whose objectives are program objectives or follow from program objectives,
or who themselves define program objectives, that are considered part of the
system. Thus system membership is confined to what may be a small set of the
bodies who are wncerned with the program. Certainly some of those
excluded may through their behaviours play a very important part in the
success or failure of a program. But it is the objectives underlying actions that
are considered in defining the system. The usefulness of these strategies is
well illustrated by one of the major cases considered later. The development
of Scotland-the provision of jobs and of a good social and physical environment-is essentially an objective of governmental and other public bodies.
Yet the realization of these objectives will depend upon the actions of many
private bodies. Overwhelmingly the jobs are going to be provided by private
industrialists who have a choice to locate in Scotland or not. Clearly they are
in some sense central actors, but their actions will be motivated by profitability or some factors which ultimately lead to that. They would not therefore be included in the system for program management. In practice there is
often no unambiguous statement of program objectives or of the true purposes of all the institutions involved, and there is no implication intended to
suggest that defining the system is an easy matter. Subtle changes in the way
the objectives of the program are defined could alter the boundaries of the
system. Nevertheless, the idea that what might be a very large number of
and non-system-is essential.
bodies can be divided into two group-system
It allows the analytical process to proceed by reducing the number of bodies
which it has directly to include and, more importantly, provides a logic for our
systemic approach. Once this division has been made the non-system part
cannot be forgotten. Rather, a statement can be made about the relationship
between the two groups. It is the task of the system to evoke behaviours in the
relevant institutions outside of the system which are consistent with program
objective achievement. In the illustration above the 'system' has to persuade,
in one way or another, private industry to locate in Scotland and provide jobs.
The term 'mechanisms' will be used for these means of persuasion.
In the context of program management it is not usual to think of the
institutions involved as a system. However, there are many other more familiar examples of multi-institutional systems. For example, many different
offices of government can be recognized as a system with respect to particular
societal or administrative objectives. In large industrial, perhaps multinational, undertakings the activities of each division in some way contributes
to an overall objective so that the company as a whole is a system. On the
international scale, also, the United Nations or the EEC are systems, with
respect to particular objectives, with the member nations as elements. (They
are not necessarily effective systems since conditions other than common
objectives have to be satisfied.) On a much smaller scale, informal workgroups in factories may form a system with individual workers as elements
and with respect to objectives quite different to the formally stated enterprise
objectives.
All of these examples, and perhaps particularly the last, illustrate that
institutions or elements are not necessarily part of just one system. They may
subscribe to more than one set of objectives and these may be more or less
consistent or contradictory. As individuals this is familiar, belonging to a
family, having a job, social groups, and so on. Essentially parallel comments
apply to institutions, particularly ones which have had a particular role to play
prior to the program and for which the program implies the imposition of new
goals. This may lead to unpredictable behaviours and is an area in which
industrial sociologists and industrial psychologists have made major contributions (Cyert and March, 1963; Katz and Kahn, 1966). It emphasizes again
that, while conceptually delineating a system for program management is
straightforward, in practice it requires a very careful understanding of program objectives and institutional objectives. Having identified the system,
however, then one has selected the institutions on which analysis will be
focused.
2.2 Environment
Whenever a system is defined, things or factors outside the system can always
be identified which are relevant to the system. The non-system institutions
discussed above are just one example of this. The set of factors outside the
system is called the relevant system environment. To understand the structure
and behaviour of the system a consideration of environment is fundamental.
This is true of the most simple systems and of the most complex. The
behaviour of a thermostat switching on and off makes sense only with respect
to the temperature external to the system. Although this illustration is trivial
it does have a parallel with the much more complex interaction between
complex human systems and their environments. The parallel is that the
system is always monitoring or receiving signals from its environment. These
are compared by the system with some picture of a desirable state of the
environment, or reference state. As a result of that comparison the system
will produce an output to the environment to move it towards that reference
state. However, whereas for mechanical systems the environment is well
defined (for the thermostat it is just temperature), for the type of systems
considered here it is not. Nor is the appropriate response always known or
defined.
In non-trivial examples the factors in the environment may be highly
diverse. In place of temperature for the thermostat, a manufacturer may want
to monitor and respond to changes in markets, in the cost of various factors of
production, in technical possibilities and, perhaps, in longer-term changes in
fashion. An industrial development program would want to take account of
factories moving into a region, local unemployment, and training facilities.
An environmental protection program might want to monitor sulphur dioxide
in the air, to change patterns of fuel use, and so on. In all of these cases it is
through monitoring these relevant factors and comparing them with some
reference that the system becomes aware of how well its objectives are being
achieved and the need for actions on its part.
Although when we are dealing with complex institutions the factors that are
considered may be very diverse, nevertheless the environment is not completely unbounded. It is not a blanket term used for everything outside the
system. Just as it was objectives that enabled a line to be drawn around the
system, so system objectives enable the environment to be defined. The
relevant environment consists of just those factors which are relevanr to
objective achievement. Only those things which a system needs to be aware of
and respond to are thought of as its relevant environment. What is of central
importance in the environment of one system may be quite irrelevant to
another. For example, a manufacturer marketing shoes would want to keep
up with the public's preferences for colours and styles. Changes in the preferred colour of shoes would play no part in the environment of the ennrionmental protection program (probably). However, at a general level the types
of factor may be similar. Often they have to take regard ultimately of what
individuals in a society want, with changes in social trends, with the actions of
other institutions outside the system, and with technological changes. Almost
always the impact of these changes relates to different time-scales. Account
has to be taken of the future as well as of the present.
In principle it may appear possible to go on from a statement of objectives
to draw up a list of environmental factors which are relevant, but in practice this
implies a perfect knowledge of the world. It is suggestive of a god above the
system who sees the true relationships of all these factors and communicates
them. It is more useful, therefore, to think in terms of a perceived relevant
environment. This consists of the factors which the system recognizes as
relevant, monitors, and responds to. The perceived relevant environment may
be continuously changing as the world is better understood by the system.
Factors which were previously not recognized may be included in the environment as the system recognizes their importance. Conversely, factors once
thought important may no longer be considered so. This process of a continuously changing set of environmental factors as a result of learning on the part
of the system is characteristic of wmplex human systems and is absent from
simple mechanical ones. Of course, it is not only the system's view of the
world which is changing. In some objective sense the world may also be
changing, and this may oblige the system to include new factors.
The situation with energy supply provides a good illustration. Whereas ten
years ago many activities could proceed on the simple assumption of adequate
cheap energy supplies, now consideration may have to be given in some detail
to alternative sources of energy, i.e. a whole new set of environmental factors
become relevast. The scope of the environment may also change as shifts
occur in the objectives of a system. Taking all these things together it is not
feasible to construct a static, defined picture of a system's environment, but at
any point in time a system will itself recognize an environment. That is it will
be aware of a set of factors which relate to its success; it will assess its success
in terms of these factors and will respond to changes in those factors.
Viewing system environment in this way allows a quite new definition of
the task of management to be set up. Effective management on this view is
neither more nor less than adequately recognizing and responding to changes
in environment. Although this is a rather unfamiliar statement of management,
it is a description at a very general level of what is readily observable in real
institutions. It is also a good description of what fails to happen when many of
these institutions cease to exist. The business press is full of examples of firms
which have gone bankrupt because they did not recognize or act upon
changes in the market-place, take account of competitors' actions, or recognize the importance of changing technologies. If the statement seems rather
simplistic it is because it adopts an overall view. Most discussions on management practice are not at this level, but rather are concerned with how
particular aspects of the environment can be responded to. They concentrate
on the internal state of the system rather than this external response. Such a
wncem is, of course, necessary and is discussed in later sections. However, in
order to sensibly comment on these issues it seems worth while to understand
what the pieces of system management are directed to in aggregate. At this
level, also, one can understand why it is that some system with particular
types of objective are more difficult to manage than others; it is because the
objectives of those systems delineate a more 'difficult' environment.
A 'difficult' environment is one which includes many factors subject to
rapid, perhaps unpredictable, change and where change-in one has implications for others (Bums and Stalker, 1961; Emery and Triste, 1965; Lawrence
and Lorsch, 1969). These conditions occur in-areas where there are rapid
changes in technology and in fashion, where many new competitors are entering a field, and in cases where the number and variety of things that have
to be taken into account are unusually diverse. It is possible ultimately to
equate the 'difficulty' of an environment with the number of different states it
can adopt. By different states is meant different situations which require
responding to by the system. For the thermostat the number of states is only
two. Either the temperature is above or below a reference level. For program
management it would be difficult to attach a number, other than saying it is
very large. The number of states is called the environmental complexity, and
when that number is particularly large (with respect to the complexity ordinarily surrounding similar systems) the environment is termed complex. Some
particular aspects, briefly referred to already, can be identified as contributing
to environmental complexity.
First is the number of different environmental dimensions, e.g. size of
population, climate, technology. In general this will always be large, but
particular types of system, because of the scope of their objectives, will face
more dimensions. A system consisting of a series of steel-producingplants will
face a less complex environment than one of similar size (in terms of personnel or turnover) that produces steel and, say, clothing. In fact, the inherent
improbability of this combination derives partly from the very different
environments that are relevant to each, leading to considerable extra
demands on management. At its most simple 'this is really pointing to an
increase in management demands with diversity of objectives. It is worth
noting that programs are often characterized by such diversity.
In addition to the number of dimensions, the complexity of each dimension
has to be considered. If markets can be taken as being just above or below a
particular level, monitoring the state of those markets may not put much
demand on management. However, if the system believes it needs to know
the state of its markets down to a fine level this may lead to considerable
demands. If an industrial development program is just concerned with the
number of new jobs seated in a region this is one thing. Concern with the
balance of those jobs in matching available skills of the population is more
complex. If competitors are entering a market a system may wish to know
more than just, say, their number; it may also require some detail of their
activities.
A further very important contributor to complexity is the degree to which
dimensions can be considered indeuendent. When thev are not indeuendent
but are in some way interconnected this can lead to a very rapid rise in
complexity. Put another way, can the dimensions be considered one at a time
or do they have to be considered together? Take again, for example, the
manufacturer producing shoes. He may observe his sales are down. On its
own this may not be important; it may be a random fluctuation which will pick
up again. After all, he may say, people have to wear shoes. However, suppose
competitors are entering the business. The coincidence of this with his own
drop in sales may give new significance to that drop. His response may then
be to reduce his price. However, suppose also that social trends were such
that people were walking less and therefore needing fewer shoes; his
response may be different again. What is being constructed here is a multiplicative increase in complexity because of the need to recognize an interconnectivity in dimensions of the environment. Programs are often defined in
such a way that interconnectivity must be taken into account in order to
accomplish the objectives. Programs cut across and relate to a broad spectrum
of activities, and indeed usually derive their purpose from doing so. For example, conventional ways of dealing with crime may be to adjust the level of the
police force. However, a comprehensive crime prevention program would
want to monitor, and perhaps consider together, the crime rate, unemployment rate, education standards, housing standards, wage rates, and so on.
Changes in any one of these may alter the interpretation of and response to
the others. Without suggesting that quantification of these dimensions is
possible the use of some simple numbers illustrates well the growth in
complexity that arises from what is here referred to as interconnectivity. A
system has, say, eight recognizable dimensions in its environment, each
adopting one of two relevant states. All possible combinations of these
dimensions generates 2* (= 256) states of the environment. The number of
states that are relevant to the system depends upon system objectives. If
objectives are such that all possible interconnections need to be recognized,
then the system must respond to all 256 states. If the objectives allow all of
the interconnectivity to be ignored, then only 8 x 2 (= 16) different states
need to be responded to. Often objectives are such that some number in
between is perceived as relevant. This is a crucial factor, and one which is very
important in determining system structure. The need to recognize
interconnectivities is arising increasingly because of the increase in the scale
of activities. As utilization of resources of all kinds (energy, environment,
land) pushes towards physical limits of societies or even the world, these
interconnectivitiesarise and demand recognition by systems whose objectives
are in some way concerned with them. In addition there are several
considerations relating to the complexity of an environment as it is perceived
by the system. These include the rate of changes of dimensions and the degree
to which the environment is understood. When entering new areas a system
may have to monitor dimensions which it later learns it can cease to consider
(although new dimensions will doubtless be included).
The purpose in this discussion has not been to set up a procedure through
which environmental complexity can be measured. Rather, the intention was
first of all to explain the fundamental role that the concept of environment
plays in a systems approach to management and then to begin to characterize
the situations in which the complexity of the environment is high and poses
special demands on management. It does not seem possible to draw up any
very detailed and durable picture of a system's environment. One has instead
a perceived, and therefore perhaps partial, environment which is updated as
the system's understanding increases. The task of management is the
satisfactory recognition and response to that environment, and specialists of
many types do play an important role in assisting management. Through the
use of computers and the design of models of the environment management
is now able to meet much greater degrees of complexity than has hitherto
been the case. Large amounts of information on the environment can be
monitored and processed so that fewer indicators need to be received and
acted upon by the manager. Statisticians can reduce perhaps thousands of
market figures to a few indicators of significant market changes. Market
research and, more generally, surveying techniques specialize in noting
changes in specified sectors of the environment. Economists and engineers
provide models which help to identify particular environmental factors and
their relationships. These and other specialist activities can be used to
construct whole sectors of a system environment and make it more
manageable. They provide essential support to the effective management of
large systems. The contribution of organization sciences is rather different.
Their role is to enable management to create systems structures in order to
manage the complexity of the relevant system environment. This is
accomplished by aiding managements in identifying environmental factors
and structuring a representation of the complexity of that environment.
2.3 A system in its environment
The discussion of system and environment will be taken a step further here by
enquiring into the rules that determine when a system is in balance with its
environment. The task of management has so far been defined as arising from
the need for a system to respond to environmental change. Indeed, this has
arisen very naturally from the way a system environment has been defined. It
is precisely those dimensions that a system needs to take account of. It is true
that many factors outside the system are constantly changing and that this has
little or no impact on the system. However, those changing factors would not
be considered part of the relevant environment. Similarly, if two apparently
different states of the environment always required the same system response,
then from the point of view of the system they are not two different states. To
a different observer with different purposes, two states may be clearly
observed; however, this may be a finer view than is necessary for the system.
Once more the shoe manufacturer can serve as an example. Suppose sales are
made in two regions and that the only response to falling sales is television
advertising. The television area covers both regions and advertising is used
when overall sales fall below a certain level. If one assumes that this single
response to use television based on overall sales has been shown by
experience to be an adequate response, then sales of 100 in region A and 200
in region B is an identical state so far as the system is concerned to 200 in
region A and 100 in region B. Of course, in reality this apparently redundant
information may serve many other purposes, but the point is illustrated. If any
system monitors and devotes energy to changes in a larger environment than
is necessary, institutional resources are being inefficiently used. Of course,
this may happen over a short term while the set of factors is changing or while
the system is actively learning about its environment, but if no response is
required to change in a particular dimension it will eventually be dropped.
A quite opposite example occurs when what is apparently one state
requires more than one response. The shoe manufacturer may have
discovered that sometimes television advertising is the answer to falling sales
and sometimes only discount offers are effective. In thii case what is
perceived as just one state is in fact more than one state. There is another
dimension governing which tactic is going to be effective. Presumably the shoe
manufacturer does not spin a coin to decide which to take but in the longer
tern will try to understand his environment better so that what was perceived
as one state becomes perceived as two.
The result of these illustrations is to demonstrate a need for parity between
the environmental complexity, or number of states the environment can take,
and the number of responses the system can make. When this is not the case
objectives will not be achieved as described. This receives its formal
statement in the form of a law governing the balance between d l systems and
their environments. This states that to be effective and ultimately to survive
the complexity of a system must as least equal the complexity of its
environment. In later chapters this will be used to develop results of
importance in designing system organization. For the present it i;sufficient to
explore at an illustrative level the sigmficance of this relationship. It can be
stated immediately that it is not a prescription for a simple means of balancing
system and environment. One is not led to measure environmental complexity, measure system capacity, and adjust accordingly; the previous discussion
should make further disavowal of this intention unnecessary. Rather, the
importance of the law is because it focuses attention on the danger of wasting
resources when a system has more than the requisite capacity focused on
particular parts of the environment and, more seriously, the threat to system
survival if it is insufficient.
The capacity to monitor and respond is not an abstract entity. It is a
physical reality, residing in the people and their management mechanisms
that are found in real institutions. In systems with many such institutions, it
is these institutions and the linkages between them that give the system its
capacity. Where this is insufficient the system may fail. 'Insufficient' here
means an incapacity to recognize and respond to environmental change. In
the short term a system may proceed with very little attention paid to
the environment. It may respond largely to internally generated
signalsproducing what its managers enjoy producing, for example, without
regard to market changes. Its demise may be sudden and swift.
Environmental change occurs in some objective sense whether or not the
system perceives it. If relevant changes are not perceived, or not acted upon,
then the state of the environment is governed more and more by changes
outside the system and less and less by the actions of the system itself. The
example of an aircraft in flight is an imperfect illustration but with some
parallels. The aircraft is subject to many changes in air currents (its
environment). If the pilot has the instruments to recognize these and has the
controls to respond to them the plane can get where it wants to. If the
changes are not recognized or the controls do not exist to meet changes in air
currents then where the plane goes becomes a function purely of the air
currents and not of the pilot. The system ceases to exist as a purposeful
system to go from point A to point B. This state may be more or less true as
the capacity of the system (the aircraft and pilot) more or less matches the
complexity of the environment'(changes in the air currents).
From this illustration two distinct ways are apparent in which the system
may fail. The most straightforward is a lack of resources with which to
respond to the environment. The pilot may meet air currents which the plane
is simply not equipped to counter. He can do little more than go where the
wind blows him. Parallels are easy to find in program management.
Educational programs may fail because there are not enough teachers.
Industrial programs may fail because the society does not have enough capital
or enough skilled workers to support the program, or the technology required
to achieve desired ends may be beyond the current state of the art. When
programs fail for reasons of this type it is suggestive of insufficient recognition
of real constraints at the formulation stages of the program. Thus it indicates a
particular type of failure of program management which needs to be addressed.
In the course of analysis it should generally be possible to point out when
this is likely to happen and to highlight the need for the system to modify its
objectives, perhaps in terms of their time-scale, and to focus on the creation
of the n e c e s s q capacity to achieve the original objectives.
This type of limitation on a system's potential is often a very tangible course
of failure. It is easy to see and easy to understand. But it would be wrong to
assume that it is the most common reasons for program failure. A second and
equally important cause of failure is illustrated in the case in which the system
has available the necessary resources but lacks the management capacity to
use them effectively. Increasingly programs are supported by technical
preparation of very high standards, and program objectives should be well
within the systems's capabilities. Yet even in these cases failure results. The
so-called energy crisis affecting all Western societies is an elegant example of
this. The relevant set of institutions concerned with a secure supply of
energy are many, but they did not form any system. The sudden shortage of
oil and the greatly increased price of that commodity hit these societies very
suddenly, leading to increased transport costs, often cut-backs in industrial
activity, and many undesirable concomitant effects transmitted throughout
the economy. Crisis programs were set up to develop alternative sources of
energy, often at unrealistic time-scales. Governments excused themselves for
this lack of preparedness by emphasizing the essentially unpredictable nature
of the crisis, being stimulated as it was by a Middle East war. However, the
reality was that the impending nature of the crisis was apparent to many
observers of the energy scene long before it occurred. Some had gone so far as
to correctly identify the circumstances under which it would occur. What was
missing was the linkage of these forecasters to agencies with the responsibility
for taking appropriate actions. After it occurred the program to develop
alternative energy supplies were hindered by the lack of a satisfactory system
to coordinate necessary research and development. There have been recent
major organizational changes within the United States, among other
countries, to develop the organizational capacity to manage these programs.
Usually organizational failure occurs on a less dramatic scale than this.
However, it is characterized by gaps in the monitoring of an environment, or
by missing linkages to connect this to contres which can formulate action, or
by gaps in linking these to bodies directly responsible for that action. Unlike
the pilot of an aircraft, the management system for a program can be distributed among many agencies in many different places for whom program
activities are just one of many interests. It is not sufficient that these agencies
exist; they have to be organized in particular ways if the management system
is to have the requisite capacity. It is towards avoiding system failure arising
from a lack of this sort of organization, as well as cases where the potential
resources are not sufficient, that organizational analysis is directed. The rule
of balance between environmental complexity and system capacity is the basic
guideline in this endeavour.
2.4 System st~cture
It is impossible to quantify the complexity of the environment of any system.
What is clear, even without this quantification, is that for non-trivial objectives this number is high. For development programs, as for industrial enterprises, the number of states perceived increases and increases as more of the
detailed implications of system objectives are worked out. If the systemlenvironment balance were taken to imply that all of this complexity was considered at one point then one might be surprised that any significant enterprise
could survive. It is by adopting a structure-by differentation within a system-that complex environments can be dealt with. Structure derives its
meaning and its significance from a system's needs to control complex environments. Adopting a structure is the most important way a system can cope
with such environments. Reference to the real world of enterprises with their
specialist departments and associated divisions confirms this. However, to
understand the rules governing effective structure one cannot look directly to
this real world where the forms of organization differ according to traditions,
the nature of objectives, politics, and so on. It is necessary to use system
concepts which are neutral to these specific features to gain this understanding.
System objectives have provided the basis for defining the system and for
identifying its environment. They also provide the basis for understanding
structure. At the most aggregate level any system's objectives can usually be
stated in very general terms-profitability or growth for private bodies, welfare or security of populations for national government, provision of food, or
health care for a development system. It is as these objectives are elaborated
into their more detailed implications that the wealth of environmental
dimensions becomes apparent. These objectives are elaborated in stages, and
at each new stage new dimensions in the environment become apparent.
The stagewise elaboration of objectives provides the logic for system structure. If one takes a whole governmental system this process can be observed
and described. At the most general level the objective may be some illformulated concept of welfare. Top levels of government will be concerned
with identifying general implications of 'welfare'. Perhaps it will include material wealth adequate social security, and national defence. Major programs
such as the development of a region may in outline terms also be considered at
this level. Because resources are inevitably limited and each of these implications of general objectives demand resources, choices have to be made between them. Without considering the details of how industry can be
developed, social security achieved or national security maintained, a choice
will be made to the priorities to be accorded to each. Both long- and shortterm considerations will be taken account of in this process, but neither will
include the level of detail that will eventually have to be taken into account.
Once this choice has been made, it sets the parameters or context in which the
separate areas can be considered individually in more detail. For example, the
national defence issue can be considered in a detail which allows the relative
claims of air, land, and naval powers to be taken into account. This extra
detail brings in many new environmental dimensions not considered at the
more general level. However, the response to just this set of dimensions is all
that is required, and the issue of the impacts of choices here on the industrial
development of the nation is not a necessary consideration.
This process can be described more generally. At the higher system levels
objectives are elaborated-broken down into particular issues or policy
areas-and choices are made between them which set the parameters within
which each area can be further developed. The only environmental dimensions that need to be taken into account at this level are those required to
support the decisions or choices made. Where these choices are made in
rather general terms, only environmental dimensions appropriate to this level
of generality form part of the relevant environment. Once the choices have
been made, they are then 'handed down' to the next lower system level. Here
each policy area can be expanded on its own. Dimensions are examined in
more detail, but within the framework of decisions already made at the higher
level. The higher level decisions provide the objectives for the next level
down. The process of elaboration of objectives can be repeated indefinitely,
each stage defining a new system level. From the point of view of any system
level, the level below it are sub-systems or sub-sub-systems, and so on. In the
language used here, these sub-systems are said to be embedded within the
system above. The concept of embedding is best captured in Rgure 2.l(a),
but, for convenience, the representation used will be as in Figure 2.l(b).
One of the ways structure enables a system to meet its environment is by
splitting up the environment into pieces that can be separately considered.
However, the process does more than just this. It is not simply redistributing
the total environmental complexity among levels. Instead, the exercise of
choice through successive levels is actually removing potential areas of the
a0
Environment
Syslem
0n System
f
Z
Sub-system
Figure 2.1. System structure
environment from more detailed consideration. Thus it reduces environmental complexity as well as redistributing it. The use of an illustration will be
valuable here. Consider an energy program. First of all, the objectives of that
program have to be decided. This takes place as a result of trade-off between
energy and other societal needs in the manner already discussed. Those
objectives may be stated in terms of an overall demand for energy and
perhaps available resources. The details of the problems associated with different energy strategies need not have been considered at this stage; they are
the concern of the energy program. Once received, these objectives will be
elaborated and different potential strategies, perhaps emphasis on wal, nuclear, or non-conventional resources, are considered. At this level some detail
of each strategy will be considered and a choice made between tnem. 11 ~t1s
decided, say for general reasons of reactor safety, not to develop nuclear
energy, then the detailed issues connected with nuclear power will never be
considered within the system (unless at some future time this strategy is
reversed). Thus a whole sector of the potential environment is removed. NO
detailed consideration need be made of possible supplies of uranium or of
needs for particular technical skills or types of specialized manufacturing
capacity. By exercising a choice at the higher level, considering environmental
dimensions relevant at the general level, the need for some of those factors to
be considered in more detail is removed. Exercising choice at one level provides the directions along which the management capacity at sub-system
levels will be developed, and therefore restricts the need for capacity. Understanding this dual function of structure in both distributing and limiting the
need for the management capacity to respond to the system environment is
crucial to the system.
The process of objective elaboration provides the logic for drawing up a
system hierarchy, and this is one of the important dimensions of structure that
is considered in the approach. It is natural to enquire about the relationship of
this definition of hierarchy of a system to the concept of hierarchy as it is
ordinarily used in describing real institutions. Obvious parallels do occur.
Large companies do have head offices, divisions, and branches and government has its equivalents which map fairly well to the logic described above.
However, almost always the mapping will be imperfect.
The truth is that, while parallels between the two kinds of hierarchy do
occur, the logical process described above is not intended to be a description
of how conventional hierarchies operate. Instead, it is a way of creating a
new definition of hierarchy and one that is more useful to systemic analysis.
It should always be possible to describe real institutions in terms of this new
hierarchy, but in doing so one cannot expect one-to-one translations. Quite
possibly, what is recognized as a single unit may appear at more than one
system level. The logic of the approach requires only some understanding of
the management capacity available at each system level available to respond
to the environmental complexity facing that level. There is nothing implausible or unnatural in the management capacity represented by a single unit
being distributed among several levels. The necessity for some specified way
of defining system levels is more immediately apparent in programs requiring
the efforts of multi-organizations than in single large corporate bodies. Here
the (perhaps) many separate institutions contributing to management of a
single task many have no defined hierarchical relationships between them.
The logic used here can, however, define system levels for multi-institutional
systems in a similar way to those of single large institutions.
There is one further important characteristic of this way of formulating
system levels which is not apparent in conventional hierarchies. That is the
constancy of the logic used at each system level. At each level received
objectives are elaborated which necessitate consideration of a particular environment at that level, choices or trade-offs being made which provide the
objectives to the next level down. This logic holds for upper system levels as
well as low system levels. Of course, the nature of the objectives received and
therefore the kind of environmental factors considered change as one goes
down the system hierarchy, but the process remains the same. This feature
implies structural recursion, and it adds greatly to the general applicability of
the approach. It implies that analysis does not need to start at the highest
possible level of a system and proceed to the lowest level. It is the problem
being considered that determines where in the hierarchy one starts analysis
and where one finishes. Practically, a 'top of the class' does exist. It is the level
at which objectives are internally generated rather than received. However, at
this level the process of elaboration of objectives, and the definition of the
relevant environment are no different to those of lower levels. Similarly, a
'bottom of the chain' does exist when, instead of objectives to the next lower
system being the output, action is taken directly to effect some change in the
environment. The point to be emphasized is that there is no necessity to
include these extremes in the analysis. It depends upon the purposes of the
analyst. The focus on management issues arising out of programs limits the
number of levels through which the analysis has to be taken. This is discussed
in Chapter 3.
Before leaving the discussion of system structure it is worth commenting on
an impression a reader may legitimately have received from the nature of the
discussion. In following closely the logic of system hierarchy it has not
proved convenient to cover the behaviour of that hierarchy at the same time.
As a result, the system appears to be presented as operating in what can be
called a heavily topdown mode and in a rather mechanistic way. That is, the
exercise of information flow and influence appears to emanate from the highest level and go downwards, and relates to trade-offs made at, perhaps, some
discrete and defined points in time. Such a proposition would provide a very
poor description of how real institutions behave and an equally poor interpretation of the systematic approach adopted. It would, in fact, have been possible, although less convenient for communication, to have derived the same
systemic structure by starting at the bottom of the hierarchy and working
upwards. Then quite different impressions of shortcomings would have been
received. What is clear is that information and influence flow in both directions; neither extreme is tenable although real systems can and do approach
the extremes. The consequences of this are able to be analysed using the
approach and are discussed more fully in later chapters. Regarding the
mechanistic or discontinuous nature of the system, this, too, is an unfortunate
and inaccurate impression. The influence of one system level on another is
seen as continuous and dynamic. The 'trade-offs' used in the description are
not equated with major published documents or plans, but rather with the
continuous process by which any manager influences and guides those below
him. In this respect the issuance of plans or decisions must be regarded as
atypical of what is meant here by choice or trade-off. Nevertheless, having
recognized that the process is more diffuse and less defined than it has
hitherto been made to appear, in both logic and reality there are levels at
which information and alternatives regarding various stages of objective
elaboration are considered and decided upon. The identification of these is
not simple and is itself the result of a complex process described in a later
chapter.
2.5 Functions
System hierarchy is just one of two dimensions of system structure used in the
approach. The second dimension refers to the capability of any level to elaborate its own objectives and provide objectives to its sub-systems. In this
second dimension five system functions are defined through which the system
hierarchy is able to maintain itself. These functions will be called policy,
intelligence, control, coordination, and implementation. If any of these funo
tions are missing at any level the system hierarchy cannot be maintained.
They are therefore necessary functions. They appear also to be sufficient
functions. That is, no more than these five will be necessary to understand the
ways in which a system achieves a balance with its environment. Just as the
real institutions involved in the program management provide the substance
of the system levels, so these same institutions with the linkages between
them provide the levels with the capacity to cany out these functions.
Moving from these abstract statements to the descriptive mode in which the
system hierarchy was first inroduced, three of the five functions are quickly
apparent. First of all, a choice or trade-off was mentioned at each level which
selected from potential alternative strategies. Making this choice is one of the
system functions, called here thepolicy function. Second, so that this choice is
possible alternative strategies have to be generated. This is quite distinguishable from the function of choosing and is the role of the intelligence function.
Third, once choices are made they have to be transmitted to the sub-systems,
and attempts must be made to ensure that they have the right resources to
achieve their tasks and that they are, in fact, achieving them. The control
function does this. The other two functions are called the coordination function and the implementation function. Their roles will be easier to understand
once the first three have been more adequately introduced.
The policy function chooses between what might be called alternative
strategic directions. The word 'strategic' in its more usual sense could be
misleading, since it often refers to decisions made only at the highest system
levels. However, here it is recognized that from the point of view of any
system level decisions have to be made that can justifiably be called strategic.
For the top level of government the split in resources, say between education
and other national needs, is strategic. Within an educational sub-system the
strategic decision may be the split between preschool, school, and university
education. Within the school sub-system of the educational sub-system the
ages at which children are moved between different types of school may be
strategic. What is characteristic of all these 'strategic' or policy decisions is
that they involve an element of choice which takes account both of the shorter
tern and the longer term, of what is happening in the environment of the
system, and of what are the potentials of the system. The decisions are made
with reference to the system's own objectives, the state of the environment
outside the system (provided by the intelligence function), and the state of the
sub-systems or what might be termed the internal system environment (provided by the control function). The decisions may be continually updated as
either the received objectives or the external or internal environments
change. Through these decisions the way in which the system will evolve and
the sub-system capacities be developed is, to an extent, being determined.
Where a system level sets its sub-system objectives to an increasing degree of
specificity, and thereby itself must respond to the more complex environment
relevant to that specificity, then the degree of determination of system evolution by that level is increased. This tendency is towards what is often referred
to as centralization.
The intelligence ftrnction is specifically concerned with the environment
external to the system, with monitoring changes in that environment, and with
considering alternative ways in which the system can adapt to and achieve a
balance with the environment. The possible strategies must, of course, take
account of the potential of the sub-systems as well as the environment, and
this information on the internal state is provided by the control ftrnction. The
scope of the environmental monitoring and the type of alternative strategies
considered are directly associated with the nature of the objectives which the
policy function chooses to set to its sub-systems. Hence, there is a very
dynamic loop; the type of alternatives considered by intelligence function
both influence and are influenced by the requirements of the policy function.
Although the intelligence function is not conceived as a decision function as
such, this inevitable influence cannot be ignored. In terms of real institutions,
the intelligence functional capacity is most often found in planning departments, survey departments, and various types of research institute. In all
these cases it is a familiar experience that, although the formal remit is one of
supporting management decisions because of the types of method and filters
employed, these units sometimes effectively determine that decision.
The demands made on the intelligence function follow directly from the
complexity of the environment facing the system level. This in turn follows
from the type of objective the level is setting to its sub-systems. When they
are detailed, or involve a high degree of elaboration upon the received objectives at that level, then more environmental factors have to be taken into
account. If the intelligence capacity is not sufficient to monitor such a complex environment then opportunities may be missed by the system or policy
decisions may have to be taken with an inadequate account of their consequences. Ultimately through insufficient response to environmental change the
system may cease to survive. In recent years many new supports have grown
for intelligence capacity. Most important among these are the use of computers together with mathematical modelling techniques. These make the environment easier to monitor and, by recognizing regularities in the environment, easier to understand. While this growth has been significant, so has the
growth of environmenta1 complexity, which has been brought about by the
scale of problems and the increased level of expectations of a large part of
the world's population. It is a fascinating question as to which (computers
or environmental complexity) is growing at the faster rate.
The control function is concerned with the sub-system at any level. It
receives the decisions of the policy function and transmits these to the subsystem in a form so that they provide meaningful objectives to the subsystems. That is, strategic policy decisions are translated into more operational terms which take into account the particular circumstances of each of
the sub-systems. The performance of the sub-systems will be reviewed by the
control function and common resources allocated between sub-systems
according to information received from them. The control function does,
therefore, have a decision capacity, and the references for the exercise of
decision are the strategic decisions made by the policy function and the circumstances of the sub-systems. The type of activity involved is characteristically what is thought of as operational management: progress checking,
scheduling, resource allocation. However, the control function does have an
important role to play in the overall evolution of the system and its response to
the environmental change. This dimension is often not included in conventional characterizations of operational management. It arises because of the
need for the policy function to take account of the state of the sub-systems, as
well as new opportunities perceived in the environment when making
strategic choices. Just as the intelligence function provides the view of the
environment so the control function provides this view of the sub-system.
As with the intelligence function, computers and mathematical modelling
have added to the capacity of the control function. Whereas for the intelligence function the computer data bases relate to the environment, for the
control function they relate to the performance of sub-systems. The
mathematical models for intelligence support illuminate relationships between
environmental factors. For control support they are models of relationships
within the system, typically to support decisions like the allocation of money
or materials between sub-systems.
The fourth function to be introduced is the coordination function. The way
the policy, intelligence, and control functions have been defined follows from
the process supporting systems structur-the
elaboration of received objectives at one system level and the breaking down of them into pieces to be
handled by separate sub-systems. These pieces which form the objectives to
sub-systems will not in general be independent. Much more likely, the particular ways in which one sub-system chooses to achieve its objectives will
have effects on the ways open to another. One sub-system's actions may make
life easier for another, or it may make it more difficult. Of course, sub-systems
in one sense could never be independent. They are part of the same system
and their objective are set to contribute to a larger system goal. To this
extent, sub-system interdependences are recognized when their objectives are
being set and are included in those objectives.
When it is recognised that interactions occur, then the terms of the objec-
tives will take account of this and will define parameters within which each
system must keep so that undue interactions do not occur. Very simple examples of this in real life might be geographic boundaries around the activities
of different divisions of a company, or perhaps product boundaries. In government the type of issues which can be dealt with by one department are
often very carefully defined when they are recognized as being near an interface with another department. It is then the control function which ensures
that these interfaces are maintained. However, this prior definition of a logic
for handling interactions in sub-system objectives is limited by the degree to
which those objectives are specific.
If interactions become apparent only from a more detailed understanding
of sub-system activities than that available to the system level above, those
interactions cannot be provided for in sub-system objectives. Take, for example, a governmental system at the highest level which recognizes a need to
meet a certain level of demand for energy but recognizes also the population's
demand for a pleasant healthy environment. These separate needs may be
passed on to an energy sub-system and an environmental protection system.
Clearly these two sub-systems will interact in many different ways. The
activities of one can easily lead to undesirable states of the system environment of the other. Some of these may be recognized at the higher govemment level. Quite possibly allowable levels of sulphur emissions may be
defined. This puts restrictions on both sub-systems. The objectives of the
energy sub-system would not be allowed to adopt energy strategies that led to
more than this amount of sulphur being emitted and the environmental
protection system would not be allowed to adopt strategies that required less
than this.
The more detail with which the higher level is able to consider its total
environment the more it will be able to make such provisions. However,
because the sub-systems will always perceive their own environments in greater detail new interactions will become apparent. In the